Defra urged to close GHG reporting loophole
The government's proposed regulations mandating greenhouse-gas (GHG) reporting for businesses need to be clearer on reporting scope two emissions, says IEMA
In its formal response to Defra’s consultation on the draft GHG Reporting Regulations, IEMA has warned that there is a potential loophole where emissions between companies could be missed.
At the same time, it has urged the department to refocus its draft guidance for business on environmental key performance indicators (KPIs), saying the current approach fails to adequately capture the business and environmental benefits of reporting against such KPIs.
While broadly welcoming the draft GHG Reporting Regulations, the Institute is concerned over the lack of guidance around the purchase of “green-tariff” electricity, which leaves it unclear which firms can ultimately claim the “carbon benefit”.
IEMA has called on the environment department to amend the regulations inserting a requirement that emissions from electricity consumption should be reported using a grid average. Firms buying electricity on green tariffs would be able to also report their lower emission calculations, but requiring everyone to report grid average emissions will ensure consistency in reporting and minimise confusion, states IEMA.
IEMA also highlights potential gaps in accounting for emissions from stored sources and from land owned by the reporting company, and recommends that the final text should include a statement encouraging firms to report their scope three emissions, while acknowledging that they remain outside the formal reporting requirements.
“The regulations do not mention scope three emissions (understandably), but concerns exist that some companies may deliberately exclude such emissions if they are not referenced at all. For clarity it would be helpful to state that scope three emissions are not covered by regulations but that these can be material issues for some companies and therefore reporting is encouraged,” states IEMA’s response.
The Institute also urges the government to develop new formal guidance to help firms in meeting the reporting requirements, arguing that Defra’s 2009 guidance does not address all the issues that companies will need guidance on.
Meanwhile, in its response to Defra’s draft guidance on environmental KPIs, IEMA is critical of the document’s focus on environmental burdens.
“We do not believe that is the most appropriate method for achieving the principal benefits of reporting; more emphasis needs to be placed on how the key environmental risks and opportunities of a business are being managed,” states the response.
IEMA argues that the guidance should be aligned with the business department’s (BIS) proposals to amend reporting requirements under the Companies Act to have a more strategic focus, and strongly advocates greater collaboration between DECC, Defra and BIS.
Other changes recommended by IEMA include more comprehensive guidance on supply chains and a greater focus upon environmental performance – energy efficiency is identified in particular as an important measure missing from the guidance.
The Institute is also critical of the inclusion of a breakdown of KPIs that are “significant” to the Industrial Classification Benchmark sectors and the International Standard Industrial Classification sectors, highlighting that the table includes no reference to biodiversity and ecosystem services.
“The current draft environmental reporting KPIs looks at the environment through too narrow a lens – focusing on KPIs that reflect absolute emissions,” said Martin Baxter, IEMA’s executive director of policy. “A broader perspective is needed which puts much more emphasis on how the key environmental risks and opportunities of a business are being managed.
“At Rio+20, British companies and government helped secure international support to encourage businesses to include sustainability information in their annual reports. The UK government has an opportunity to achieve this by delivering mandatory GHG reporting and by providing a broader set of KPIs in business environmental reporting.”
IEMA’s responses to both consultations are available to download in full from iema.net.